Netflix Hopes You'll Do the Right Thing (Updated)


Millions of people share their  Netflix account password with family and friends who don’t actually reside in the same  household, grouse financial analysts who follow the company's stock. Today, Netflix responded with a  50 percent higher priced plan option that will extend the concept of family and sharing, encourage customers to do the right thing.

 Netflix now has  33 million paying subscribers, plus another 10 million viewers who are taking a free ride on a friend’s password, reported Bloomberg News this morning.  With the basic $7.99 service, two streams can be sent simultaneously to devices (here, there, anywhere) authorized with one account sign-in name.

Both Michael Pachter of Wedbush Securities and Heath Perry of Goldman Sachs were quoted  in the piece, arguing that the service should close the  loop hole. Perry said Netflix could increase revenues by 5 percent by  monitoring service use more diligently.  "It’s time to change,” chimed in Pachter. “They could say they are cracking down on piracy. They can appeal to fairness.”

Which is kinda, sorta what's being done. Netflix' response today was to introduce  a more convenient (and expensive) $11.99 family service tier that allows up to four customers to stream programming simultaneously to Netflix-ready tablets, computers, mobile phones, TVs, Blu-ray players, set top boxes and a/v receivers. It's giving customers a way to voluntarily acknowledge they give their password out and for Netflix to rake in  more money.  

Clearly,  Netflix CEO Reed Hastings has learned from past mistakes, from harsher, unapologetic  marketing moves  that shocked the core base.  When Hastings split Netflix’ streaming and DVD mail-order services in 2011, effectively doubling the price for a customer to take both, about 800,000 subscribers took a walk. And Netflix stock  - a darling of Wall Street – took a serious nosedive.

Today, Netflix  has to tred lightly. It's no longer the only big  streaming video show in town. There's competition from  HBO Go, Amazon Instant Video,  Redbox Instant by Verizon,  Blockbuster On Demand  and also a  forthcoming “over the top”  box service backed by Intel. Plus "Anywhere TV" apps from cable and satellite TV services.

Curiously, Netflix expects only one percent of customers will buy into the more flexible, 4-stream family plan. Feeling guilty, yourself?